Legislature(2009 - 2010)SENATE FINANCE 532

02/24/2010 12:00 PM Senate RESOURCES


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12:24:49 PM Start
12:25:58 PM Presentation: Alaska Mining
01:02:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time and Location Change --
+ Joint w/(H) Resources TELECONFERENCED
Presentations: Alaska Mining
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
              SENATE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                       February 24, 2010                                                                                        
                           12:24 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Lesil McGuire, Co-Chair                                                                                                
 Senator Bill Wielechowski, Co-Chair                                                                                            
 Senator Charlie Huggins, Vice Chair                                                                                            
 Senator Hollis French                                                                                                          
 Senator Bert Stedman                                                                                                           
 Senator Thomas Wagoner                                                                                                         
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Craig Johnson, Co-Chair                                                                                         
 Representative Mark Neuman, Co-Chair                                                                                           
 Representative Peggy Wilson                                                                                                    
 Representative Chris Tuck                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Gary Stevens                                                                                                           
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Bryce Edgmon                                                                                                    
 Representative Kurt Olson                                                                                                      
 Representative Paul Seaton                                                                                                     
 Representative David Guttenberg                                                                                                
 Representative Scott Kawasaki                                                                                                  
                                                                                                                                
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
 Senator Joe Thomas                                                                                                             
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: ALASKA MINING                                                                                                     
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
STEVE BORELL, Executive Director                                                                                                
Alaska Miners Association (AMA)                                                                                                 
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Gave a presentation on Alaska mining.                                                                     
                                                                                                                                
LORNA SHAW, Executive Director                                                                                                  
Council of Alaska Producers (CAP)                                                                                               
Fairbanks, AK                                                                                                                   
POSITION STATEMENT: Gave a Presentation on Alaska mining.                                                                   
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
12:24:49 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  LESIL MCGUIRE  called the  joint meeting  of the  Senate                                                            
and House  Resources Standing  Committees to  order at  12:24 a.m.                                                              
Present  at  the call  to  order  were Senators  Huggins,  French,                                                              
Wielechowski and McGuire and Representatives Wilson and Johnson.                                                                
                                                                                                                                
^Presentation: Alaska Mining                                                                                                    
                  Presentation: Alaska Mining                                                                               
                                                                                                                                
12:25:58 PM                                                                                                                   
STEVE  BORELL,  Executive  Director,   Alaska  Miners  Association                                                              
(AMA),  noted  that in  2009  and  2010  about 175  family  mining                                                              
operations around  the state are expected to  produce about 54,000                                                              
ounces each year.                                                                                                               
                                                                                                                                
Moving  on  to the  major  producing  mines,  he stated  that  the                                                              
Usibelli  Coal  Mine, in  Healy,  Alaska,  has 130  employees  and                                                              
shipped  about 1.9  million tons  last  year; 52  percent came  to                                                              
interior  power  and heating  plants  and  48 percent  was  export                                                              
coal.  Usibelli's   current  lease  area  has   approximately  700                                                              
million tons  that could be produced.  At their current  rate of 2                                                              
million tons per year, that is 350 years of production.                                                                         
                                                                                                                                
12:29:56 PM                                                                                                                   
Greens   Creek  Mine   has  331   employees   plus  12   full-time                                                              
contractors, 79  percent of which  are Alaska residents,  equaling                                                              
about  $32 million  in annual  wages plus  benefits. Greens  Creek                                                              
began  operating  in 1989  and  has continually  found  additional                                                              
ore; it is  the largest property  tax payer in the  Juneau borough                                                              
and the largest private sector employer in Southeast.                                                                           
                                                                                                                                
The  Pogo Gold  Mine  saw significant  improvements  from 2008  to                                                              
2009,  including  a  50 percent  reduction  in  reportable  safety                                                              
incidents  and a  12  percent increase  in  production to  390,000                                                              
ounces.  Pogo  Gold  Mine  has 297  employees  plus  97  full-time                                                              
contractors.  Fuel   and  electrical  costs  are   Pogo's  biggest                                                              
challenges.                                                                                                                     
                                                                                                                                
12:32:49 PM                                                                                                                   
Nixon Fork  Mine and Rock Creek  Mine are in idle  status. Pacific                                                              
Northwest  Capital and  Fire River  Gold  now own  the Nixon  Fork                                                              
property   and   are  consolidating   information   and   planning                                                              
drilling. They expect to begin production in two years.                                                                         
Rock Creek Mine  has 20 employees now and will  have 135 employees                                                              
at full  operation, with  a $10.4  million payroll annually.  Care                                                              
and maintenance  costs are about  $17.5 million annually.  A water                                                              
management plan  is being implemented  and options  for restarting                                                              
the project are being evaluated.                                                                                                
                                                                                                                                
12:34:51 PM                                                                                                                   
SENATOR WAGONER joined the meeting.                                                                                             
                                                                                                                                
MR. BORELL  said several  additional projects  are in  the advance                                                              
exploration phase.  Chuitna Coal will provide about  350 jobs. The                                                              
overall deposit  is 300 million  tons of coal, which  if converted                                                              
into oil,  would be the fourth  largest oil deposit in  Alaska. He                                                              
summarized   Chuitna   Coal's   logistical   needs  and   said   a                                                              
supplemental  Environmental   Impact  Statement  (EIS)   is  being                                                              
prepared.                                                                                                                       
                                                                                                                                
Donlin Creek completed  a project feasibility study  and conducted                                                              
intensive outreach  in villages in  2009. They are  evaluating the                                                              
feedback  and  looking  at  options   to  meet  the  large  energy                                                              
requirement.                                                                                                                    
                                                                                                                                
12:38:09 PM                                                                                                                   
Pebble Project's  2010 budget will  be approximately  $70 million.                                                              
Pre-feasibility   analysis   continues   and   Pebble   does   not                                                              
anticipate applying  for permits in 2010.  A source of  power is a                                                              
major challenge.  The main  parts of  the project  are: a  road, a                                                              
port,   the   mill   facility    itself,   permitting,   workforce                                                              
development,  commodity prices  and evaluating  if the project  is                                                              
economic.                                                                                                                       
                                                                                                                                
MR.  BORRELL  said  30 grass  roots  exploration  projects  around                                                              
Alaska  spent more  than  $1 million  each  in  2008. That  number                                                              
dropped  to  17  in  2009 due  to  the  financial  crisis  but  30                                                              
projects are expected again in 2010.                                                                                            
                                                                                                                                
12:41:13 PM                                                                                                                   
He said Heatherdale  Resources at Niblack, Full  Metal Minerals at                                                              
Lucky Shot  and International  Tower Hill  at Livengood  are three                                                              
of the larger  exploration projects. Heatherdale and  CBR Gold own                                                              
the project  at Niblack and a  25,000 foot drilling program  is in                                                              
progress.  Full  Metal  Minerals  expects  to take  a  10,000  ton                                                              
sample at  Lucky Shot. Drilling  and geological understanding  are                                                              
expanding at Tower Hill.                                                                                                        
                                                                                                                                
SENATOR STEDMAN joined the meeting.                                                                                             
                                                                                                                                
SENATOR WAGONER  asked about the  feasibility of the  Chuitna Coal                                                              
project being completed in the foreseeable future.                                                                              
                                                                                                                                
12:44:24 PM                                                                                                                   
MR. BORELL  answered that, depending  on legal challenges  against                                                              
it, Chuitna  Coal has a 98 percent  chance of becoming  a mine. He                                                              
said the coal is very low sulfur coal.                                                                                          
                                                                                                                                
LORNA  SHAW,  Executive  Director,  Council  of  Alaska  Producers                                                              
(CAP), said  she would  speak about the  permitting process.   The                                                              
Large  Mine Permitting  Team coordinates  with  the Department  of                                                              
Environmental  Conservation  (DEC),  federal  agencies  and  other                                                              
agencies involved in mine permits.                                                                                              
                                                                                                                                
REPRESENTATIVE NEUMAN joined the meeting.                                                                                       
                                                                                                                                
12:47:26 PM                                                                                                                   
MS.  SHAW  said  Kensington, a  small,  underground  mine  halfway                                                              
between Juneau and  Haines, has gone through a  20 year permitting                                                              
process. In  June, 2009, after the  third round of  permitting and                                                              
a  Supreme  Court   Decision,  Kensington  was   awarded  permits.                                                              
Exploration  and  construction  are  underway  and  the  mine  has                                                              
worked  1,000 days  with  no  lost-time accident.  The  operations                                                              
workforce is  anticipated to  be 200  employees and production  is                                                              
expected to begin  in the summer of 2010. State  leadership played                                                              
a  key role  in the  permitting  process by  cooperating with  all                                                              
agencies involved  to meet deadlines and requirements  for permits                                                              
outside of Department of Natural Resources' (DNR's) boundaries.                                                                 
                                                                                                                                
12:50:22 PM                                                                                                                   
Kensington,  though it  is not operating  yet,  is in the  renewal                                                              
phase for some permits originally issued in 2005.                                                                               
                                                                                                                                
MS. SHAW said the  Fort Knox heap leach project is  a new addition                                                              
to  Fort  Knox which  is  a  low-grade,  open  pit mine  25  miles                                                              
northeast  of  Fairbanks.  Fort  Knox  has been  a  mill  and  vat                                                              
leaching operation,  with ore  ground down  to the consistency  of                                                              
table  salt   and  gold  leached   out  in  a  series   of  tanks.                                                              
Alternatively,  heap  leaching  involves  placing  ore on  a  heap                                                              
leach  where the  gold is leached  in  place. It  is low cost  and                                                              
allows recovery of gold from a much lower grade of ore.                                                                         
                                                                                                                                
Fort Knox applied  for permits in November of  1992. State permits                                                              
were received  in February of 1994,  and federal permits  in March                                                              
of  1995. Heap  leach  permitting  began in  2006.  The state  was                                                              
critical in permit  success. DNR had the engineering  expertise to                                                              
review all  the plans.  Agencies without  the expertise  were able                                                              
to hire experts  to provide oversight, review and  verification of                                                              
the state agency's work.                                                                                                        
                                                                                                                                
12:54:13 PM                                                                                                                   
MS. SHAW  said the  heap leach  leads  to a longer  life for  Fort                                                              
Knox -  2016 for the  mine and 2022  for processing. The  mine has                                                              
500 full-time employees  and 300 contractors will be  on site this                                                              
summer, primarily  related to the  heap leach. The  average annual                                                              
wage is  $70,000. Seventy percent  of the annual  operating budget                                                              
is spent  in Alaska and Fort  Knox is the second  largest property                                                              
tax payer  to the  borough and  is a  significant source  of local                                                              
funding. She  said mines must  get through the permitting  process                                                              
in order to bring these benefits to the communities.                                                                            
                                                                                                                                
REPRESENTATIVE  PEGGY WILSON noted  that Ms.  Shaw said  Fort Knox                                                              
was  the  second  largest  tax   payer  in  the  borough  but  the                                                              
literature says it is the largest.                                                                                              
                                                                                                                                
MS. SHAW  said Fort Knox is  the single largest piece  of property                                                              
that is taxed. Alyeska pays slightly more.                                                                                      
                                                                                                                                
12:56:42 PM                                                                                                                   
MS.  SHAW said  Red Dog  is  an open  pit zinc  and  lead mine  in                                                              
Northwest  Alaska  and is  one  of  the largest  zinc  concentrate                                                              
producers  in the  world. Red  Dog began  production in  November,                                                              
1998, and has  a complex permitting history. Zinc  and lead prices                                                              
have rebounded  from historic lows  in 2008, bringing  state taxes                                                              
and  Northwest Arctic  Native  Association  (NANA) royalties  back                                                              
up. Red Dog pays  about $50 million in wages and  benefits and has                                                              
525  employees  and contractors,  of  which  56 percent  are  NANA                                                              
shareholders.  Red Dog's current  ore body  will soon  be depleted                                                              
and Red Dog  is in a permitting  process to expand to  the Aqqaluk                                                              
deposit.  The National  Environmental Policy  Act (NEPA)  requires                                                              
the  supplemental   EIS  to  evaluate  impacts  to   human  health                                                              
including a full Health Impact Assessment (HIA).                                                                                
                                                                                                                                
12:59:12 PM                                                                                                                   
The  HIA, without  any  guidelines, could  have  derailed the  EIS                                                              
process.   State  leadership   worked  with   other  agencies   to                                                              
determine  how  health  information   should  be  included.  State                                                              
Health and  Social Services representatives  are now on  the Large                                                              
Mine Permitting Team.                                                                                                           
                                                                                                                                
MS.  SHAW said  the  state is  also  involved  in Reclamation  and                                                              
Closure  Plans. A closure  plan  must be in  place before  permits                                                              
are  issued to  build a  mine; however,  the plan  changes and  is                                                              
reviewed  every   five  years.  Red   Dog  had  to   update  their                                                              
Reclamation and Closure Plan.                                                                                                   
                                                                                                                                
CHAIR  MCGUIRE interrupted  and  noted  that the  House  Resources                                                              
Committee had to  begin their meeting. She asked Ms.  Shaw to wrap                                                              
up.                                                                                                                             
                                                                                                                                
MS.  SHAW   summarized  that  the   state's  involvement   in  the                                                              
permitting  process is  critical. State  leadership and  influence                                                              
ensures that the  complicated permitting process is  done well and                                                              
the  state's  interests  are  protected   while  working  to  find                                                              
solutions and implement regulations.                                                                                            
                                                                                                                                
1:02:05 PM                                                                                                                    
CHAIR  MCGUIRE  thanked  the presenters  and,  seeing  no  further                                                              
business to  come before the  committee, adjourned the  meeting at                                                              
1:02 p.m.                                                                                                                       
                                                                                                                                
                                                                                                                                

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